Should I buy Man United shares after they just crashed 18%?

Man United shares got hammered across the pond in New York after the football club’s long-running takeover saga took yet another twist.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Tabletop model of a bear sat on desk in front of monitors showing stock charts

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

There has been as much action involving Man United (NYSE: MANU) shares recently as there has been in the team’s Old Trafford stadium. After starting last September at $13, the share price surged all the way up to $26 by February of this year. Then on 5 September, it plummeted 18% to $19.

This is the stock’s steepest one-day percentage fall on record. The reason for this collapse is that the football club’s owners have reportedly decided to wait for a better offer before selling up.

So, does this provide me with a good opportunity to invest in a few Manchester United shares? Let’s find out.

What happened

To recap, the controlling shareholders of Manchester United, the Glazer family, started to explore the possibility of a sale in November. Immediately, two serious bidders emerged, namely Sheikh Jassim of Qatar and British billionaire Sir Jim Ratcliffe.

However, neither came close to the owners’ asking price, which is said to be between £7bn and £10bn ($8.8bn-$12.5bn), according to the Mail on Sunday. For context, the company is currently valued at $3.1bn on the New York Stock Exchange.

Therefore, the share price could surge once again if prospective bidders upped their offers towards the targeted valuation. On the flip side, the stock could have further to fall given that it’s still trading around 45% above where it was before rumours of a sale emerged.

Newspaper reports say the Glazers believe they will get a better price in a couple of years time. They reportedly think that the 2026 World Cup in North America will spark renewed interest in the club.

A difficult few years

This latest development hasn’t gone down well with the majority of Manchester United’s fans. They’ve suffered for years now having watched Manchester City, the rival team from the same city, win five of the last six Premier League campaigns.

This dominance has continued this season, with City once again sitting top of the league after four games. United are mid-table and seem light years away from challenging for the title. This is despite Manchester United having a bigger net spend than their rivals since 2016.

Nevertheless, the club remains one of the most followed in the world. Last year, it generated over £550m in revenue and it expects a record £630m to £640m in fiscal 2023.

Will I buy the stock?

Since the Glazers bought Manchester United for £790m in 2005, the club has spent over £1.1bn on transfers. Yet many supporters still accuse the owners of not investing enough. This dynamic is the reason why I’m not interested in investing in football clubs.

Put simply, the majority of fans demand that all surplus cash be reinvested back into the playing squad every season. Manchester United isn’t regularly profitable, but even if it was, most supporters wouldn’t want excess cash just sitting on the balance sheet for a rainy day.

Also, many fans don’t like the idea of cash being regularly distributed in the form of dividends to shareholders. Manchester United stock stopped paying dividends last year. Like most investors, I value profits and payouts, and there are neither here today.

So I’m not interested in buying the stock. I see it as more suited to day traders than long-term investors.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Ben McPoland has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Portrait of elderly man wearing white denim shirt and glasses looking up with hand on chin. Thoughtful senior entrepreneur, studio shot against grey background.
Investing Articles

These FTSE shares have fallen 20%+ in 2023. Are they no-brainer buys for 2024?

Edward Sheldon highlights three FTSE stocks that have tanked this year. Has the share price weakness in 2023 presented an…

Read more »

Investing Articles

Could the Rolls-Royce share price hit £4 in 2024?

The Rolls-Royce share price has more than doubled so far this year. Our writer considers some possible reasons for it…

Read more »

Investing Articles

Why this FTSE 100 growth stock jumped 28% last month

Jon Smith explains why a new deal and changing views on future interest rates have helped one FTSE 100 stock…

Read more »

Young Asian woman holding a cup of takeaway coffee and folders containing paperwork, on her way into the office
Investing Articles

These dividend shares yield 11% and 8.6% and I think they look cheap!

With passive income on his mind, this Fool is targeting dividend shares for his portfolio. Here are two he likes…

Read more »

Businessman use electronic pen writing rising colorful graph from 2023 to 2024 year of business planning and stock investment growth concept.
Investing Articles

Could the Lloyds share price hit 85p in 2024?

Morgan Stanley analysts say the Lloyds share price could reach 85p in 2024. But could a possible windfall tax throw…

Read more »

Older couple walking in park
Investing Articles

Here’s how I’d invest a £20,000 Stocks and Shares ISA to help build long-term wealth

This writer thinks a £20K Stocks and Shares ISA could be turned into something much, much bigger over time. Here's…

Read more »

British Pennies on a Pound Note
Investing Articles

I wouldn’t start investing by buying penny shares. Here’s why!

Christopher Ruane explains why, if he was to start investing for the first time already knowing what he does now,…

Read more »

Warren Buffett at a Berkshire Hathaway AGM
Investing Articles

No concrete action plan to get rich? I’m using the Warren Buffett approach to building wealth

Warren Buffett has made some basic investment principles work very well for him. This writer thinks it's worth following the…

Read more »